From the March-20, 2002 issue of Credit Union Times Magazine • Subscribe!
Baca urges LaFalce to adopt Sherman amendment on alternative capital; NAFCU changes its position
<p>WASHINGTON - California Congressman Joe Baca (D) has thrown his support behind allowing federally-insured credit unions to count alternative capital toward their net worth calculation. In a letter he sent to Rep. John LaFalce (D-N.Y.), a ranking member of the House Financial Services Committee, Baca stated his support for Sherman's efforts and encouraged LaFalce "to do the same" and to make alternative capital authority for federally-insured credit unions part of deposit insurance reform legislation. Baca cited H.R. 1151 and the fact that the law "made over 16 million individuals in low-income communities eligible for credit union membership. It is essential that credit unions have the ability to raise the necessary level of capital and protect their net worth, to fully serve these new members. Credit unions absolutely must have alternative capital sources if they are to truly reach out to these underserved communities." During the mark up of deposit insurance reform by the House Financial Services Committee, Sherman introduced his amendment that would delete the words "low income" from section 1790(d) of H.R. 1151 concerning the definition of net worth, and thus allow all federally-insured CUs to count secondary capital in their net worth. Sherman later withdrew his amendment. "Congressman Sherman's amendment is extremely useful to solving this problem, because it clarifies that credit unions can build capital from alternative sources and apply this capital towards their regulatory net worth requirement. Enacting the legislation with this amendment would give credit unions the tools they so genuinely need to provide membership to millions of low-income consumers." Baca further pointed out that, "alternative capital will additionally supply another layer of protection for the National Credit Union Share Insurance Fund." In a related development, the NAFCU Board voted March 14 to reverse its longstanding opposition to allowing federally insured credit unions to count alternative capital toward their net worth calculation. NAFCU was the last of the major credit union trade associations to hold out its support on the issue. CUNA and NASCUS have both already voiced their support.</p>